Nasdaq Pulls Back Sharply But Dow Remains Little Changed

While the Dow continues to linger near the unchanged line in afternoon trading, the tech-heavy Nasdaq has shown a significant move to the downside.

Currently, the Nasdaq is down 136.15 points or 1.0 percent at 13,140.27. The S&P 500 is also down 15.02 points or 0.4 percent at 4,268.83, while the Dow is up 15.22 points or 0.1 percent at 33,588.50.

The pullback by the Nasdaq may partly reflect profit taking in the tech sector, with the index coming under pressure after reaching its best intraday level in well over a year in early trading.

Overall trading activity has remained somewhat subdued, however, as traders continue to look ahead to next week’s Federal Reserve meeting.

The Fed is due to announce its latest monetary policy decision next Wednesday, with the central bank widely expected to pause its recent series of interest rate hikes.

Key inflation reports are also likely to be in the spotlight next week, as the data could impact whether the Fed resumes its rate hikes next month.

CME Group’s FedWatch Tool is currently indicating a 62.1 percent chance the Fed will leave rates unchanged next week and a 37.9 percent chance of another rate hike.

North of the border, the Bank of Canada on Wednesday announced it has decided to once again raise interest rates after leaving rates unchanged for two straight meetings.

The Bank of Canada increased its target for the overnight rate by 25 basis points to 4.75 percent, citing stubbornly high inflation and stronger than expected economic growth.

Canada’s central bank said the rate hike reflects its view that monetary policy was not sufficiently restrictive to bring supply and demand back into balance and return inflation sustainably to the 2 percent target.

In U.S. economic news, a report released by the Commerce Department showed the U.S. trade deficit widened significantly in the month of April.

The Commerce Department said the trade deficit increased to $74.6 billion in April from a revised $60.6 billion in March.

Economists had expected the trade deficit to jump to $75.2 billion from the $64.2 billion originally reported for the previous month.

The wider trade deficit came as the value of exports plunged by 3.6 percent to $249.0 billion, while the value of imports surged by 1.5 percent to $323.6 billion.

Sector News

Software stocks have moved sharply lower over the course of the session, dragging the Dow Jones U.S. Software Index down by 3.0 percent. The index continues to give back ground after reaching its best closing level in over a year on Monday.

Considerable weakness has also emerged among gold stocks, as reflected by the 1.4 percent drop by the NYSE Arca Gold Bugs Index.

The weakness in the gold sector comes amid a steep drop by the price of the precious metal, with gold for August delivery tumbling $23.70 to $1,957.80 an ounce.

Meanwhile, energy stocks continue to see substantial strength, driving the Philadelphia Oil Service Index and the NYSE Arca Oil Index up 3.4 percent and 2.6 percent, respectively.

The rally by energy stocks comes as the price of crude oil for July delivery is jumping $0.94 to $72.68 a barrel.

A notable increase by the price of natural gas is also contributing to significant strength among natural gas stocks, as reflected by the 2.1 percent surge by the NYSE Arca Natural Gas Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan’s Nikkei 225 Index tumbled by 1.8 percent, while Hong Kong’s Hang Seng Index advanced by 0.8 percent.

Meanwhile, the major European markets moved slightly lower on the day. While the German DAX Index dipped by 0.2 percent, the French CAC 40 Index and the U.K.’s FTSE 100 Index both edged down by 0.1 percent.

In the bond market, treasuries have come under pressure after closing roughly flat for two straight sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 9.6 basis points at 3.795 percent.

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